Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e- Product Management
and New−Product
Development
Text © The McGraw−Hill
Companies, 2002284 Chapter 10
the producer’s door. The firm will have to build channels of distribution—perhaps
offering special incentives to win cooperation. Promotion is needed to build demand
for the whole ideanot just to sell a specific brand. Because all this is expensive, it
may lead the marketing manager to try to “skim” the market—charging a relatively
high price to help pay for the introductory costs.
The correct strategy, however, depends on how fast the product life cycle is likely
to move—that is, how quickly the new idea will be accepted by customers—and
how quickly competitors will follow with their own versions of the product. When
the early stages of the cycle will be fast, a low initial (penetration) price may make
sense to help develop loyal customers early and keep competitors out.Sometimes it’s not in the best interest of the market pioneer for competitors to
stay out of the market. This may seem odd. But building customer interest in a really
new product idea—and obtaining distribution to make the product available—can
be too big a job for a single company, especially a small one with limited resources.
Two or more companies investing in promotion to build demand may help to stim-
ulate the growth of the whole product-market. Similarly, a new product that is
unique may languish if it is not compatible with other products that customers rely
on. This is what recently happened with Digital Video Express (Divx) video disks.
When Divx came out, many consumer-electronics makers, retailers, and film studios
were struggling to launch DVD format products. Divx had a number of advantages
over DVD, but it was not compatible with many of the ordinary DVD players that
were already on the market. Video rental stores didn’t want to stock movies for both
DVD and Divx, and consumers didn’t want to get stuck with Divx players if movies
were not available. So as DVD started to sizzle Divx fizzled.^10Not all new product ideas catch on. Customers may conclude that the marketing
mix doesn’t satisfy their needs, or other new products may meet the same need bet-
ter. But the success that eludes a firm with its initial strategy can sometimes be
achieved by modifying the strategy. Videodisc players illustrate this point. They were
a flop during their initial introduction in the home-entertainment market. Con-
sumers didn’t see any advantage over cheaper videotape players. But then new
opportunities developed. For example, the business market for these systems grew
because firms used them for sales presentations and for in-store selling. Customers
could shop for products by viewing pictures at a video kiosk. Of course, change
marches on. CD-ROM took over much of this market when computer manufactur-
ers added a CD drive as a standard feature. And now DVD has the advantage because
it can handle even more video on one disk.^11
Also relevant is how quickly the firm can change its strategy as the life cycle
moves on. Some firms are very flexible. They can compete effectively with larger,
less adaptable competitors by adjusting their strategies more frequently.It’s important for a firm to have some competitive advantage as it moves into
market maturity. Even a small advantage can make a big difference—and some firms
do very well by carefully managing their maturing products. They are able to capi-
talize on a slightly better product or perhaps lower production and/or marketing
costs. Or they are simply more successful at promotion—allowing them to differ-
entiate their more or less homogeneous product from competitors. For example,
graham crackers were competing in a mature market and sales were flat. Nabisco
used the same ingredients to create bite-sized Teddy Grahams and then promoted
them heavily. These changes captured new sales and profits for Nabisco. However,
competing firms quickly copied this idea with their own brands.^12
The important point here is that industry profits are declining in market matu-
rity. Top management must see this, or it will continue to expect the attractiveManaging maturing
products
Pioneer may need help
from competitors
New product sales may
not take off